United KingdomManual

The UK has a standard VAT rate and one reduced VAT rate. In addition, a number of items are zero rated

UK VAT Deduction limits

Input VAT can generally be deductible if the goods or services are used for business purposes. There are however certain items that are never deductible.

The below list provides detail on deduction rules for each type of expense:

  • Input VAT on hotel accommodation or restaurant meals is 100% deductible provided the expense is incurred for business purposes by employees of the company
  • Input VAT on conferences, fairs and exhibitions is 100% deductible provided the expense is incurred for business purposes by employees of the company
  • Business gifts are 0% deductible
  • Car rental, car repair and fuel expenses are 50% deductible where the expenses is connected to both, business and personal purposes. If wholly and entirely for business purposes, then VAT can be deducted at 100%
  • Taxi, train and other transport expenses is 100% deductible provided the expense is incurred for business purposes
  • Entertainment client expenses are generally 0% deductible unless they are provided to overseas customers

Deducting VAT prior to the beginning of the economic activity is only allowed on certain items. These include services supplied within six months before the registration date and VAT incurred on stock items that remain on stock on the date of registration. For more information, please read Regulation 111 of VAT regulations. 

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